Company Law: Personality, Constitution and Directors' Duties
Company law tests the consequences of incorporation and how companies are governed. ACA questions cover separate legal personality, constitution, share capital, directors' duties, shareholder remedies and meetings.
Incorporation and constitution
On registration under the Companies Act 2006, a company becomes a body corporate with separate legal personality; members' liability is limited unless it is unlimited. The constitution comprises the articles and any resolutions/agreements; model articles apply by default. The corporate veil can be pierced only in limited cases, such as fraud or where a company is a mere facade. Share capital must be maintained: distributions are lawful only from distributable profits, subject to solvency statement procedures for reductions or buybacks.
Directors and decisions
Directors owe the seven general duties in CA 2006 ss171-177: act within powers; promote success of the company for members as a whole (s172, with regard to stakeholders where relevant); exercise independent judgement; reasonable care, skill and diligence; avoid conflicts; not accept benefits; declare interests. Decisions are usually by board or shareholder resolution; ordinary resolutions need a majority, special resolutions 75%. Shareholders may bring derivative claims or unfair prejudice petitions.
Worked example: A director votes on a contract in which she owns 40% of the counterparty. She must declare her interest under s177 and, if the conflict is material, authorise it under s175 by independent directors or members. Voting without disclosure breaches duty and may make the contract voidable.
Traps: saying s172 means directors must balance all stakeholders equally; it does not. Confusing ordinary/special resolutions; ignoring capital maintenance; treating limited liability as unlimited.